FOMC Minutes to shed light on Fed’s balance sheet intentions – BMO CM

Michael Gregory, Deputy Chief Economist at BMO Capital Markets, explains that the policy relevant parts of the May 3 FOMC statement were little changed as it affirmed that the risks to the outlook “appear roughly balanced”, which is code for “the policy normalization door remains open”.

Key Quotes

“And the now-rote reference about continuing (100%) reinvestment “until normalization of the level of the federal funds rate is well under way” was repeated, with no other hints about the Fed’s balance sheet intentions. However, the Minutes could shed a bit more light on the latter.”

“Recall, it was the Minutes from the March meeting that first revealed that “most participants… judged that a change to the Committee's reinvestment policy would likely be appropriate later this year.” Previously, the consensus call was closer to mid-2018 for a shift. But, the March Minutes also revealed that they still had a lot to figure out on this front. Perhaps the FOMC took another step in May.”